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Sunday, 9 February 2014

"Passing Off and Unfair Competition", hosted by
Baker & McKenzie LLP, was the subject of the third event held by
the Journal of Intellectual Property Law & Practice (JIPLP) in conjunction with its German
partners at GRUR Int.

Passing off

The first talk came from Ben Allgrove, a partner at Baker &
McKenzie and a contributor to JIPLP. Ben's main message revolved around
two propositions; (i) that the tort of passing off is flexible and that it has
evolved over time; an evolution that is still progressing to this day, and (ii)
in the core area of practice there is no real difference between passing off
and unfair competition.

The basics

Ben began by discussing the basics of the tort of passing
off. The origins of passing off began in the nineteenth century. Perry
v Truefitt, 49 ER 749 stated that ‘A
man is not to sell his own goods under pretence that they are the goods of
another man.’ The classic action of passing off is based on the trinity
of (i) goodwill, (ii) misrepresentation to the public, and (iii) damage to the
claimant, as was reaffirmed in the 'Jif Lemon' case (Reckitt &
Colman Ltd v Borden Inc[1990] UKHL 12).

Early development

The point of an evolving concept was illustrated further by reference to
the leading case of Cadbury Schweppes Pty Ltd v Pub Squash Co. Pty Ltd[1980] UKPC 30,
which showed early on that it was acknowledged that the concept of passing off
could even extend to advertising campaigns. Cadbury Schweppes launched a lemon
drink in Australia which was novel in that it was specifically aimed at the
adult male market. Pub Squash Co copied the drink itself and the general theme
and tone of the marketing campaign. Even though Cadbury Schweppes failed
to establish passing off, there was at least some acknowledgment that passing
off could happen in advertising.

Extended passing off

Ben next reviewed the three different ways in
which passing off has been extended.

1. Initial Interest confusion is a concept which was derived
from US law. The doctrine was defined by the International Trademark
Association (INTA) as

'... a doctrine which has been developing in U.S. trademark
cases since the 1970s, which allows for a finding of liability where a
plaintiff can demonstrate that a consumer was confused by a defendant’s conduct
at the time of interest in a product or service, even if that initial confusion
is corrected by the time of purchase'

Och-Ziff Management Europe Ltd & Another v Och
Capital LLP & Another[2010] EWHC 2599
(Ch) showed a flexibility in the doctrine (on which see the IPKat here). In
this case there was a variety of trade mark in issue which involved the word
'OCH'. At the point of trade there was no confusion, as members of
the public knew they were dealing with Och-Ziff. However, pre-sale,
various individuals had independently contacted Och-Ziff asking whether they
had moved offices after seeing a sign for OCH Capital in the window of OCH
Capital's offices. In the end, while
the claim under Article 9(1)(a) of the CTM
Regulation 2009 failed, the claim under Article 9(1)(b) succeeded
as it didn’t matter that there was no confusion at the point of trade: what was
decisive was that there was confusion pre-sale. Arnold J found that
several uses of 'OCH Capital' infringed the registered trade marks under
Article 9(1) (b), concluding that there was a 'manifest likelihood of
confusion'. This case showed that passing off is a tort that can evolve.

The next step in this evolution is post-sale confusion. In L'Oréal SA
v Bellure NV [2010] EWCA
Civ 535(on which see IPKat overview here)
Bellure's business model was to sell cheap 'knock off' perfumes whose smell
alluded to the smell of L'Oréal 's own perfumes. Even though there
was no confusion pre-sale and at the point of trade as consumers knew what they
were buying and who they were buying from, it was found there was post sale
confusion and therefore there was unfair advantage.2 The tort of passing off has now been extended to the reputation and
goodwill held in products via quality association. The key components
come from the ‘Advocaat’ case (Erven Warnink B.V. v J. Townend &
Sons (Hull) Ltd[1979]
AC 731) Lord Diplock established five criteria for a claim of
extended passing off. There must be:

1. Misrepresentation2. by a trader in the
course of trade3. to prospective customers of his or ultimate
consumers of goods or services supplied by him4. which is
calculated to injure the business or goodwill of another trader and5.
which causes actual damage to the business or goodwill of the trader bringing
the action.

In the recent ‘ Vodkat’ case, Diageo North America
Inc v Intercontinental Brands (ICB) Ltd [2010] EWHC 17
(Ch), Arnold J held that "vodka" is a term that is capable of
distinguishing a particular class and quality of product. In branding a vodka
blend as "VODKAT" and marketing it in a manner that did not make
clear to the public that this was not vodka, the judge held Intercontinental
Brands liable for passing off.

More recently in the long-awaited appeal in Fage UK Ltd &
Another v Chobani UK Ltd & Another [2014] EWCA
Civ 5 (see IPKat overviewhere)
the argument focused on whether Chobani could use the term ‘Greek yoghurt' to
describe their yoghurt. The Court of Appeal, upholding the trial judgment,
sided with Fage in finding that 'Greek yoghurt' had to be made in Greece.

3. False Endorsement is the third aspect of extended passing
off. The leading case on false endorsement is Irvine v Talksport[2002]
FSR 60, in which Eddie Irvine successfully argued passing off when
Talksport used his image for an advertising campaign. More recently,
in Fenty v Arcadia Group
Brands Ltd (t/a Topshop) [2013] EWHC 2310 (noted
by the IPKat here), pop
star Rihanna succeeded in her claim for passing off against retail giant
Topshop, who used her image on a t-shirt without her permission. The public are
well aware that celebrities have authorised merchandise, and Rhianna
successfully argued that members of the public would believe her brand was
associated with Topshop. The damage was loss of control of her reputation
which was a key thing.

Colour

The Irish case of BP Amoco PLC v John
Kelly Ltd and Glenshane Tourist Services Ltd (Court of Justice in
Northern Ireland, Chancery Division, 16 June 2000, here)
involved a dispute over the colour green. Here BP claimed that the second defendant,
which ran a filling station under the ‘TOP’ brand used the same colour
green as them, and argued that members of the public would be confused into
thinking their garage was a BP garage. In this case passing off failed as the
court stated petrol is a commodity product and a consumer would not drive away.
There would thus have to be a pretty strong association with a colour,
and it is very difficult to show pre-sale confusion. It was noted that in
a supermarket for example, cheaper brands often use the same colouring as
bigger competing brands.

German unfair competition law

The second talk was presented by Gert Würtenberger (a
partner at Würtenberger Kunze, Munich) on the topic of German Unfair
Competition Law.

After the industrialisation and liberalisation of the
market, Gert explained, Germany passed its first law in unfair competition in
1896. However problems were still evolving, so Germany reacted and passed
a revised Unfair Competition Act 1909 ("the Act”).

Gert then discussed the Warsteiner case (Case
C-312/98Schutzverband gegen Unwesen in der Wirtschaft e.V.
Warsteiner Brauerei Haus Cramer GmbH & Co. KG). This case involved
a company which operated a brewery in Paderborn, 40km from Warstein. The
dispute centred on the wording used by the company on their labels; the front
label said 'Warsteiner Premium Light‘ and 'Warsteiner Mark [Brand] Premium
Fresh‘, and on the back the label said ‘bottled in their new Paderborn
Brewery’. The applicant, an association the objective of which was
to combat unfair competition, believed that the design of the labels was
misleading, and that the geographical indication of source 'Warsteiner‘ may
consequently not be used for beer brewed in Paderborn.

At first instance, the trade association argued that the brewing company was
deceiving consumers by not indicating that this specific beer was not brewed in
Warsteiner, which was found to be misleading. The brewing company then
put a small indication on the front of the bottle, which was deemed to be too
small. Finally the Supreme Court referred questions to the CJEU to see
whether the directive could take influence from case law on geographical
indications. In its final decision the Supreme Court made a complete turnaround
on its opinion regarding the labelling and stated, that if the consumer is
interested where the beer is brewed, the consumer will look on the front and
the back of the bottle.

Section 4 of the Act gives examples of unfair commercial practices; however,
the list is not final. Section 4(9) is the closest to passing off in UK law in
which it states, ‘Unfairness shall have occurred in particular where a person
offers goods or services that are replicas of goods or services of a competitor
if he

(a) causes avoidable deception of the purchaser regarding
their commercial origin;
(b) unreasonably exploits or impairs the assessment of the replicated goods or
services; or
(c) dishonestly obtained the knowledge or documents needed for the replicas.’

In German unfair competition, it is not the actual copying that makes an act
unfair; it is the behaviour behind the copying. In the German Federal Court of Justice (BGH) decision
in Regalsystem on 21 January 2013, IZR 136/11 the court ruled
that a nearly identical copy of aesthetic design features might be justified
under the German Law of Unfair Competition by customers' interest in visually
compatible products. In Regalsystem, German manufacturer
Tegometall asked for an injunction to prevent Czech manufacturer Eden Europe
s.r.o. from selling technically and visually comparable shelving units.
In this case the court found that the act was not 'unfair' and denied the
injunction. The Court emphasied that it was in the interest of the
consumer to have options to buy different products which may be cheaper, and
that it was unfair to force a competitor to vary the shelves which may lead
someone not to buy them.

Comparison

There seem to be a variety of similarities between the two
doctrines of passing off and unfair competition. However, some have suggested
that the UK tort of passing off is unfair competition in all but name.

During the panel discussion featuring His Honour Judge
Richard Hacon QC, Dr Birgit Clark and Professors Phillip Johnson and
Christopher Wadlow, it was suggested that there are still differences between
the two concepts, mainly the fact that unfair competition has more of a
consumer protection element, whereas passing off is more business-to-business
and competitor-to-competitor.

So should we opt for unfair competition, passing off, any
combination of them both -- or what? It will be good to know what you
think!

"Germany passed its first law in unfair competition in 1986. However problems were still evolving, so Germany reacted and passed a revised Unfair Competition Act 1899." One can only assume that the bulk of the problem was pre-emptive marketing by time travellers.

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